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When a group of major social networks - pretty much all those that matter other than Facebook - announces the adoption of open standards, that is effectively good news for all parties involved: good news for users, for developers and for the networks themselves.

We can debate how “open” the standard really is in this case, and how deeply the OpenSocial APIs will let application developers reach into the social graph, as compared to the Facebook API. Looking beyond the initial uncertainties, however, it is fair to say that open standards are generally good news, and the quasi-anonymous support for OpenSocial will help social networking sites and application developers offer applications that are not only easier to develop, but truly more useful for their members.

Take Lending Club for example: OpenSocial offers the ability to retrieve information about a user, and get distribution, across many social networks. What it means is that Lending Club borrowers will be able to leverage their network of connections more broadly, that lenders will be presented with better opportunities to invest in people they trust and feel more comfortable with (such as friends of friends), and that a broader distribution will help find better matches between lenders and borrowers.

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The user profiles of both lenders and borrowers will also be more complete and accurate: there is a lot of information in my Linkedin profile for example (such as my work history) that is not in my MySpace profile.

We believe person-to-person lending will grow faster and become a credible alternative to banks more surely in an environment where people feel connected to each other. That was the main reason for launching Lending Club on Facebook last May, and another good reason to announce our extension to universities and alumni associations last week.

This morning we announced our commitment to build a person-to-person lending application that leverages the OpenSocial APIs. By doing so, we are hoping to contribute to making social networks more useful, by helping users leverage their existing social-network relationships at the time they need them the most: to cover medical expenses, finance a new business venture or take advantage of an investment opportunity.

Not as entertaining as sharing pictures, but possibly more useful.

Lending Club Members Speak Out Series

We continue to receive many comments from our members. This weekend, we would like to share a few more comments from Lending Club borrowers, who often focus their remarks on Lending Club’s better interest rates, convenience, and more responsible approach to credit.

“It was very easy and straightforward, and I received my loan within the same week that I applied for it. I used the money to consolidate my credit cards into one easy monthly payment, which makes them easier to pay off coming out of college.”
-- Brian, 22, from South Boston, MA

“I loved how quick and easy it was to get a loan, I really enjoyed that I got to track how many people were able to help me out up to minute since it is all done online. The site also sent me updates while everything was going on so I didn't have to worry. Being a just out of college adult and having student loans, I wasn't able to get such a great rate with anyone else. The rate I got was at least 5% less than my other options.”
-- Stephanie, 24, from Atlanta, GA

“I used Lending Club to get a better rate and pay off my credit cards. I had $5,000 on credit cards with an average APR of 20 %. I paid off the amount in full and I just have one Lending Club bill per month. I am saving 50 % on interest every month which I used to pay to my credit card companies.”
-- Sharad, 25, from Syracuse NY

"Lending Club made it possible for me to get the money I needed without a ridiculous rate. With credit cards, you'll bury yourself with service fees and cash advance fees. Glad I chose the better route. Thanks, Lending Club!”
-- Jim, 22, from Austin, TX

These and other testimonials will soon be available on our secure site at http://secure.lendingclub.com. If you are a lender or a borrower on Lending Club and have your own success story to share, we’d love to hear from you. Leave a comment on this blog or write directly to feedback@lendingclub.com.

We had a busy week here at Lending Club, so we’re going to enjoy the weekend, watch a few videos and relax until tomorrow’s upgrade at 8pm Pacific.

Renaud

Prior to Norwest, Jeff served as President, COO and board member of DoveBid, Inc., a privately held business auction firm, which expanded during his tenure via internal growth and acquisition from a $10M revenue run rate to a $120M revenue run rate with 400 employees. From 1990 to 1999, Jeff was co-founder, President, CEO and Board member of Edify Corporation, a venture backed enterprise software company focused on voice and internet e-commerce platforms and applications. Edify held its IPO in 1996 and was sold to S1 Corporation in 1999.

1. Jeff, how do you think p2p lending will change the face of consumer lending?

Person-to-person (p2p) lending will be an important driver of change in the world of consumer lending, because the economic model of p2p lending is significantly more efficient than the traditional business models of banks, credit card companies and other institutional lenders. That improved efficiency enables better interest rates for both individual borrowers and individual lenders when they participate in a p2p lending transaction. So as awareness grows among consumers that they can both borrow and lend at more attractive rates, we believe that demand to participate in a p2p lending platform such as Lending Club will explode. Today, the overall markets for consumer lending in the U.S. are enormous, so p2p lending has tremendous room to grow from its current small base before it will seriously impact the operations of large consumer lenders. But you can be sure that banks, credit card companies and other consumer finance companies will be paying very close attention to the growth of the p2p lending category -- they know that they will have to deal with p2p lending more and more as time goes by.

2. Are you a lender or a borrower in Lending Club?

I am a lender on Lending Club. It was a very straightforward and easy experience over the internet. I registered as a lender on Lending Club via Facebook, entered a total amount that I wanted to lend, and decided on an overall risk profile for my loans. Then Lending Club's software automatically generated a potential portfolio of roughly 20 loans and suggested amounts for me to fund for each loan. I had the opportunity to look at each borrower's profile, including their job, income, debt level, credit history and reason for borrowing. From the suggested loan portfolio, I picked out the loans that I wanted to fund, adjusted the amounts that I wanted to fund or stayed with the suggested funding levels, and hit the submit button. It was as simple as that. Lending Club then automatically deducted the funds from my account and set up my account to automatically receive the loan repayments from the borrowers. My current portfolio is yielding over 13% -- a lot better than money market funds.

3. Did the Lending Club deal ruin your summer vacation?

Norwest Venture Partners was very excited to invest in Lending Club, and we wanted to make sure that we kept the investment decision making and due diligence process moving forward in a timely fashion over the course of the summer. I had a long scheduled summer vacation that landed right in the middle of our investment process, but we had to keep going on closing the investment, vacation or not. This meant daily phone calls and emails from our vacation spot. I would not say that it quite ruined the vacation, but I can say that everyone in my extended family now knows Renaud!

Prior to joining Canaan Partners, Dan Ciporin was CEO of Shopping.com, where he oversaw the company's growth from zero to over $100 million in revenues in just 5 years, culminating in the company's initial public offering in October 2004. Shopping.com was the third largest ecommerce site on the web before it was acquired by eBay in August of 2005.

1. Dan, what prompted you to invest in Lending Club?

The consumer credit market is an absolutely gigantic market and yet paradoxically one of the few sectors that has not yet been completely upended by the internet. I think the Lending Club approach to consumer lending is not only a great disintermediation approach in a large, established market sector but also through the focus on affinity relationships takes what has been proven to work on the web and applies it uniquely to the lending marketplace.

2. What makes the person-to-person lending space attractive from your point of view?

P2P services and functionality in general has been at the heart of web market disruption, from Ebay to MySpace to Facebook, using only a few of the most prominent examples. I think the opportunity is ripe now to apply P2P functionality in the consumer lending space, especially with the particular focus on pre-existing affiliations that Lending Club has.

3. Tell us more about your background and how it is relevant to Lending Club.

Prior to my experience as CEO of Shopping.com, which we viewed not only as a price comparison service but more importantly a complete facilitation mechanism for the entire purchasing process, I was a senior vice president at MasterCard International. Working in the "traditional" consumer credit market was a first-hand opportunity to view the enormity of influence this market has throughout the economy, and how important even relatively simple product innovations can be in building and maintaining a customer base.

More directly relevant to Lending Club, one of the innovations we worked on at MasterCard was in helping to develop the affinity/co-branded market for credit cards, an effort that ultimately proved to be a huge success for us. I have seen how effective affinity relationships can be in 'traditional' consumer lending, and I think that Lending Club can take this same kind of innovative approach in the massive consumer credit market with even more compelling results.

As reported earlier yesterday afternoon, we are thrilled to announce that Norwest Venture Partners and Canaan Partners invested in the Company as part of a total $10.26MM investment round. Jeff Crowe from NVP and Dan Ciporin from Canaan Partners are joining the Company’s board of directors.

We launched the company as part of the Facebook F8 platform on May 24 and since then have issued $750,000 in loans among Facebook users. Launching on Facebook made sense: we believe that person-to-person lending will grow faster in an environment where people feel connected to each other, and Facebook offers the perfect environment for this with friends, groups and networks. Facebook Lenders can build a “portfolio” of loans based not only on credit profiles but also based on their connections to the borrowers (attended the same school, worked for the same company, etc.).

Facebook now has over 6 million active user groups which are prime targets for financial services. However, Facebook users are younger than the average online population, and our strict screening criteria (640 minimum credit score, less than 20% DTI) led us to decline about 75% of all applications, as younger borrowers tend to have a lower FICO score. We are coming up with new tools to help the “declined” borrowers understand the importance of good credit and take specific actions to improve their credit score.

We will be using the funds to expand beyond our current Facebook application. Stay tuned for interviews with Jeff Crowe and Dan Ciporin on this blog later this morning.